USDA Lowers Meat, Poultry Production Forecast

4-10-14 – While most of the trade was concentrating on the grain and soybean aspects of the USDA’s World Agricultural Supply and Demand report Wednesday, the USDA quietly lowered its forecast for total red meat and poultry production from last month.  Slightly higher beef production will be more than offset by lower pork, broiler and turkey production.\r\n\r\n   For beef, the annual forecast rose to 24.565 billion pounds from the March projection of 24.540 billion.  Expected pork production was lowered to 22.760 billion pounds from 23.360 billion, and the forecast for chicken production was lowered to 38.500 billion pounds from 38.700 billion.\r\n\r\n   First-half beef production will be eclipsed by greater second-half output as higher first-half placements come to market.  The USDA estimated first-half beef production at 12.140 billion pounds, and second-half output at 12.625 billion.\r\n\r\n   That comparison, however, could be skewed a bit by lower-than-expected first-quarter production, possibly the effect of a harsh winter slowing cattle growth and/or reduced beef demand.  Slaughter was down for the period, so the lower first-quarter production fits with what was seen at the time.\r\n\r\n   Cattle price estimates for the year were raised from last month as hog and chicken supplies tighten.  As a result, the USDA expected more beef imports than was expected in March.  With strong processing grade beef demand, 2014 beef imports were forecast at 2.325 billion pounds, versus the March estimate of 2.285 billion.\r\n\r\n \r\n\r\nPORK PRODUCTION ESTIMATES DECLINE\r\n\r\n \r\n\r\n   The USDA’s WASDE report lowered the pork production estimate in every quarter of the year from the March report.  The latest annual production estimate is 22.760 billion pounds, compared with a 23.360-billion estimate in March.\r\n\r\n   USDA economists used figures from the Quarterly Hogs and Pigs report, which estimated a year-over-year decline in the December-February pig crop and revised the June-August 2013 pig crop lower.\r\n\r\n   Pork producers indicated intentions to increase farrowings in the March-May and the June-August quarters, the loss of baby pigs to the Porcine Epidemic Diarrhea virus still was expected to result in lower slaughter for this year.\r\n\r\n   Hog growers are sending larger hogs to slaughter in an attempt to make up for the losses to PEDv, but USDA analysts still lowered their production estimates from last month.\r\n\r\n   First-half pork production was forecast at 11.155 billion pounds, versus an 11.420-billion-pound estimate in March.  Second-half production was estimated at 11.605 billion pounds, compared with a March estimate of 11.940 billion.\r\n\r\n \r\n\r\nPOULTRY PRODUCTION EXPECTED LOWER\r\n\r\n \r\n\r\n   The WASDE report lowered reduced its estimate of chicken production because hatchery data suggested slower growth in eggs set and chicks placed, perhaps the result of rising feed costs.  There also were reports of strong demand for fertilized eggs from Mexico.\r\n\r\n   First-half broiler production was estimated at 19.0 billion pounds, compared with 19.075 billion in the March estimates.  Second-half production was estimated at 19.5 billion pounds, compared with a March estimate of 19.625 billion.\r\n\r\n \r\n\r\nCATTLE MIXED; DEFERREDS SEE PRESSURE\r\n\r\n \r\n\r\n   Live cattle futures are mixed in overnight trading as nearby contracts continue Wednesday’s move higher and deferred positions wilt.  Nearby April appears to be closing the gap with higher-priced cash cattle as expiration looms.\r\n\r\n   Cattle traded last week at $148 to $150 per cwt on a live basis, compared with Wednesday’s April settlement of $143.75.  Packer bids of $146 have been heard, but this still is above the April futures.\r\n\r\n   The USDA reported its choice beef cutout value Wednesday at $225.46 per cwt, down $1.53, and select at $215.23, down $1.74.\r\n\r\n   Week-to-date slaughter at 350,000 head, compared with 349,000 last week and 357,000 last year.\r\n\r\n   The CME Feeder Cattle Index for the seven days ended Tuesday was $178.74, up $0.06, while the April futures contract settled Wednesday at $178.87, up $0.57.\r\n\r\n \r\n\r\nIN OUR OPINION\r\n\r\n \r\n\r\n–WASDE estimates of lower pork production from PEDv appear to confirm private reports that losses are greater than were reported in March.\r\n\r\n–WASDE raised its 2014 milk production forecast, feeling higher prices could bring more rapid expansion in cow numbers and increased per-cow production, but our sources say California drought pressure could reduce herd size and production from this dairy-intensive part of the country.\r\n\r\n